Public Accounts Committee on May 3rd, 2012
Evidence of meeting #42 for Public Accounts in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was costs.
A recording is available from Parliament.
On the agenda
MPs speaking
Also speaking
- Kevin Page Parliamentary Budget Officer, Library of Parliament
- Sahir Khan Assistant Parliamentary Budget Officer, Expenditure and Revenue Analysis, Office of the Parliamentary Budget Officer, Library of Parliament
- Peter Weltman Senior Director, Expenditure and Revenue Analysis, Office of the Parliamentary Budget Officer, Library of Parliament
- Michelle d'Auray Secretary of the Treasury Board of Canada, Treasury Board Secretariat
- Robert Fonberg Deputy Minister, Department of National Defence
- Dan Ross Assistant Deputy Minister, Materiel, Department of National Defence
- François Guimont Deputy Minister, Deputy Receiver General for Canada, Department of Public Works and Government Services
- André Deschamps Commander, Royal Canadian Air Force, Department of National Defence
- Simon Kennedy Senior Associate Deputy Minister, Department of Industry
- Kevin Lindsey Assistant Deputy Minister, Chief Financial Officer, Finance and Corporate Services, Department of National Defence
- Tom Ring Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services
10:15 a.m.
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
Treasury Board has a number of policies and directives and guidelines. They cover a wide range of activities and initiatives.
10:15 a.m.
Conservative
Laurie Hawn Edmonton Centre, AB
Thank you. A guideline is simply that: it's a guideline. It doesn't mean everything is going to be cut that way.
10:15 a.m.
Secretary of the Treasury Board of Canada, Treasury Board Secretariat
A guideline is designed to give guidance.
10:15 a.m.
Conservative
Laurie Hawn Edmonton Centre, AB
Thank you.
With respect to some costs that were brought up, my understanding of sunk costs is they are things that are there for the F-18 and will be there for the F-35, whether it's pilots, technicians. I guess, Mr. Fonberg, is that what we're defining as sunk costs, or what DND is defining as sunk costs?
10:15 a.m.
Deputy Minister, Department of National Defence
Defining as operating costs—yes, sir.
10:15 a.m.
Conservative
Laurie Hawn Edmonton Centre, AB
Okay. So it's here for the F-18 today and it will be there for the F-35 tomorrow.
There's obviously a lot of confusion around this. To go back to the operating costs for the F-18 versus the F-35, Mr. Lindsey, I don't know if you have the answer to this or not, but there are two figures for every airplane. There's one that's the sort of hourly operating cost in terms of POL, which is fuel, oil and lubricants, and so on, and then there's what we used to call—I don't know if we still do—the log guide figure, which is a much bigger number and includes salaries and pensions and the whole nine yards. That's the figure I think Mr. Allen was looking for—the log guide figure.
Do you have that off the top of your head for the F-18?
May 3rd, 2012 / 10:15 a.m.
Kevin Lindsey Assistant Deputy Minister, Chief Financial Officer, Finance and Corporate Services, Department of National Defence
No, sir, I don't have that figure for the F-18. What I could affirm, though, is that the combination of those cost factors you've just identified are those costs that form the costs in this $10 billion in operating costs.
10:20 a.m.
Conservative
10:20 a.m.
Assistant Deputy Minister, Chief Financial Officer, Finance and Corporate Services, Department of National Defence
Sir, I wouldn't characterize them as sunk costs. I would categorize them as ongoing operating costs—a cost of operating a fighter fleet.
10:20 a.m.
Conservative
Laurie Hawn Edmonton Centre, AB
Right, which some people have termed sunk costs; but yes, yours is much more correct.
With respect to the F-35 program being a development program, going back to the F-18, there were far fewer F-18s flying at the time when we made the decision to buy that airplane than there are F-35s flying now. So I would suggest, maybe to Mr. Ross, that, yes, it's a development program, but we've been there with development programs before, which turned out just fine, thank you, meaning the F-18. Is that a fair statement?
10:20 a.m.
Assistant Deputy Minister, Materiel, Department of National Defence
Yes, it is.
10:20 a.m.
Conservative
Laurie Hawn Edmonton Centre, AB
Now, with respect to going back 20 years and so on, the reason we don't use more than 20 years is because it's so unpredictable. There are so many unknowables out there that it really becomes a meaningless number. But I'm not sure who I'd ask about this....
I'll ask Mr. Fonberg. You can pass it on.
You can take that number and extrapolate it to anything you want. You can extrapolate it to 30 years, 40 years, or 50 years, but for sound planning, you have to go with something that at least has some predictability to it. Is that a fair statement?
10:20 a.m.
Deputy Minister, Department of National Defence
Yes, absolutely.
10:20 a.m.
Conservative
Laurie Hawn Edmonton Centre, AB
Okay.
Mr. Kennedy, we talked about industrial benefits and so on, and technology. Is it fair to say that if we don't participate in the level of technology that is available to us through the F-35, and in all the things that go into that airplane in supporting it, we will not be in a position to be a part of whatever the next level of technology is? Is that a fair statement?
10:20 a.m.
Senior Associate Deputy Minister, Department of Industry
I think what I would say is that we certainly see, from an Industry Canada perspective, certain advantages to being part of this consortium because of the access to the very advanced technologies and the ability to develop them that it provides, which you wouldn't have with another process.